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Lloyd’s Register: Current oil market turbulence creating floating storage spike

Degradation of refined products stored on tankers a well-documented issue that needs monitoring and specialised quality management to ensure best practice, says spokesman.

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UK-based classification society Lloyd’s Register (LR) on Monday (11 May) published an article on the current oil market turbulence creating a spike in floating storage, and how LR can assist in allaying some technical issues that may arise from the situation:

Negative oil prices and off-the-scale volatility in crude markets are positive for floating storage, as the next chapter of the Covid-19 pandemic energy crisis plays out on the world’s fleet of tankers.

Beyond the turbulence, record-breaking volumes of oil and refined products being stored on tankers at sea are presenting owners and operators not only with sky-high earnings but numerous technical and practical considerations.

The vessel’s flag state, age, size, cargo being stored, as well as the storage duration and location, whether surveys are due and when all need to be explored.

Most shoreside tanks in key hubs of Singapore, northwest Europe and the US Gulf are already full or leased, as global crude demand collapses by a third, or some 30 million barrels per day (bpd). Volumes deployed to floating storage as the surplus overwhelms commercial storage is estimated to exceed 400 million bbls (barrels) by the end of June, based on assessments from shipbrokers. That’s enough to meet all of the US oil needs for 20 days. Drawdowns aren’t expected until late 2020 at the earliest as and when the oil market rebalances.

There are now 163 million bbls of crude in floating storage based on Lloyd’s List Intelligence data, the most in records going back to 2009. Between 40 million bbls and 65 million barrels of clean products such as gasoline, jet fuel, diesel and gasoil are being stored on tankers, according to research provided from two shipbrokers.

That encompasses 500 tankers worldwide, from very large crude carriers through to smaller, medium-range and handysize ships. More than 110 vessels are the smaller tankers never before designated for this purpose and at anchor in locations where floating storage isn’t regularly seen.

The data captures these smaller tankers because of changed methodology that defines floating storage as vessels at anchor for seven days or longer, rather than the normal 20-day period. This change was made to include unsold or surplus cargoes on tankers awaiting discharge at ports. These tankers are expected to end up in floating storage because the delays reflect difficulties securing land-based storage.

As much as eight percent of the clean tanker fleet is currently being used for floating storage based on this methodology. An estimated 10 percent of all clean product loadings and eight percent of crude loadings over April will end up in floating storage, reports from energy commodities analysts conclude.

Technically, permanent or semi-permanent floating storage tankers are defined as ‘moored oil storage units’ or ‘moored oil storage tankers’, using their own anchor and operated at a fixed location. Survey frequency is considered on a case-by-case basis. The Lloyd’s Machinery Certificate (LMC) that encompasses propelling and essential auxiliary machinery covered in special surveys is withdrawn for storage units and can be maintained or suspended for moored oil storage tankers.

Most of the older tankers used for floating storage, particularly off Malaysia and Singapore, supplement tank farms and are defined as moored oil storage tankers. They are frequently linked to oil traders and mainly conduct ship-to-ship transfers to other bunker units or smaller tankers. Numbers in Singapore rose over the last quarter of 2019, as oil traders and shipowners sought to secure extra supplies with floating storage of IMO 2020-compliant low-sulphur marine fuels.

Tankers used for storing crude and products on a shorter-term basis gain little from changing their Class status to a moored oil tanker, based on recommendations from LR. Unless floating storage is a longer-term option, repurposing is generally unnecessary unless docking, intermediate, renewal and special surveys undertaken by classification societies need to be accommodated in which case this needs to be discussed at the earliest opportunity with Class.

Even if class and statutory requirements remain unchanged, operators are still encouraged to discuss their vessel’s floating storage deployment with LR, as well as flag states, to check for any new requirements or changed inspection regimes.

“We need to understand where owners intend to park this piece of floating steelwork and for how long,” said Tony Field, Vice President of Marine and Offshore, Middle East & Africa. “We partner with our clients assisting them to look at the risks, then manage or mitigate them and reach the most effective solutions.”

If the owners do wish to change the Class status to a Moored Oil Tanker/Unit then the survey regime can potentially be reduced, provided the flag state agrees. Any reduction is based on best practice, the age of the ship and considered on a case-by-case basis. The tanker’s survey history and the sea conditions where it will be anchored at a fixed location are also taken into account.

Typically, an intermediate survey could be reduced in scope, and the renewal special survey fully maintained even if dry-docking can be waived and an in-water survey accepted by Class and Flag in lieu.

Remote surveys, which are typically used for postponement surveys, minor damages and potentially some outstanding issues after a physical survey, are proving to be a useful alternative if access to the ship is difficult while travel restrictions remain in place in some countries during this pandemic.

Who pays for hull or propeller cleaning and how it will be monitored – especially if storage wasn’t envisaged at the time of signing the original contract – will depend on the charter party. Hull fouling is expected if vessels are stationary for any period of time and can lead to increased fuel consumption, so whether responsibilities and liabilities lie with the owner or charter need to be agreed.

Degradation of refined products stored on tankers is a well-documented issue that needs monitoring and specialised quality management to ensure best practice, said Douglas Raitt, LR’s Singapore-based Advisory Services Manager.

“There’s a need to spread the message that this is not a simple, straightforward matter of storing products for six to seven weeks and then sell it and hope the product quality remains the same,” said Raitt.

“With lighter products such as naphtha and gasoline you may find that over time the composition changes, with evaporation of the lighter ends. For jet fuels and distillates oxidation stability could impact product quality and suitability for eventual end use. Bacterial growth is also a real threat to clean products. Tanks need to be regularly drained of water condensation to prevent ingress, with regular testing as necessary and dependent on ambient storage temperatures and storage conditions to check for bacterial growth. How long the product is stored, different tank coatings and their condition can also impact product degradation and cargo values.”

“With regards to VLSFOs it should be noted that these may be prone to instability over time so a regular health check through testing is required if fuel is to be stored onboard for longer periods of time.”

Unlike 2014 and 2015, when floating storage was last at significant levels, most tankers aren’t being used for contango plays. When the spot price is higher than the future price oil traders can buy oil on the physical market, take out a futures contract and store and later sell the oil at a profit.

Although anecdotal research suggests that a number of crude and product tankers are being used for this purpose, most storage is enforced as a result of the demand collapse and surplus now flooding the market. Discharge delays and bottlenecks at the port of Singapore were running to three weeks, rather than the normal three days at the end of April.

Based on latest forecasts between 30 and 114 Aframax tankers alone will be needed to accommodate accelerating clean floating storage demand until early June, an extraordinary number that will further push rates to fresh records if realised. The largest product tankers are securing spot charter rates that equate to earnings above $170,000 daily, nearly three times levels seen at the beginning of April, before the size and scale of the surplus emerged. Meanwhile VLCCs are averaging $150,000 daily, well above breakeven levels of around $25,000 daily for a modern ship of this size.


Photo credit: Shaah Shahidh
Published: 12 May, 2020

 

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Legal

Helmsman on Inter-Pacific Petroleum legal battle: When ignorance meets fraud

Lester Ho, Associate Director of law firm Helmsman shared his timely key takeaways on the recent case of Goh Jin Hian against defunct Singapore bunker supplier Inter-Pacific Petroleum.

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Lester Ho Helmsman

Lester Ho, Associate Director of multi-disciplinary law firm Helmsman LLC shared his timely key takeaways on the recent case of Goh Jin Hian v Inter-Pacific Petroleum when the Appellate Division of the High Court in Singapore overturned the High Court’s finding that Mr Goh’s breach had caused IPP to incur the losses:

The collapse of a company often prompts a search for blame, especially where the downfall stems from deliberate misconduct such as fraud that appears avoidable in hindsight. Unsurprisingly, a company’s directors are frequently perceived as the root of the problem and become prime suspects in the inevitable witch hunt for accountability. The recent case of Goh Jin Hian v Inter-Pacific Petroleum Pte Ltd (in liquidation) [2025] SGHC(A) 7 is a timely reminder of a director’s duties as well as the legal risks in the event of breach.

The downfall of Inter-Pacific Petroleum Pte Ltd (“IPP”) is well-documented. The Maritime Port Authority of Singapore suspended IPP’s bunker craft operator licence after discovering that the mass flow meter of a bunker tanker chartered by IPP had been tampered with. Concerns raised by IPP’s banks in relation to its business led its non-executive director, Mr Goh Jin Hian, to discover that it was heavily indebted to the banks. It was also discovered that the facilities had been used on sham sale and purchase transactions.

IPP was subsequently placed in compulsory liquidation, and Mr Goh was sued for breach of his director’s duties. It was alleged that the sham transactions could have been prevented had Mr Goh discharged his duties and that he was therefore responsible for IPP’s losses. At first instance, the High Court found that Mr Goh had breached his duty of care and ordered him to compensate IPP for approximately US$146 million in losses (Inter-Pacific Petroleum Pte Ltd (in liquidation) v Goh Jin Hian [2024] SGHC 178). Among other things, the High Court found that Mr Goh was in breach because he was entirely ignorant of IPP’s cargo trading business.

The Appellate Division of the High Court upheld the finding that Mr Goh had breached his duty for having been unaware of IPP’s cargo trading business. However, it overturned the High Court’s finding that Mr Goh’s breach had caused IPP to incur the losses. The Appellate Division found that IPP failed to prove that Mr Goh would have uncovered the sham transactions even if he had discharged his duty. Accordingly, Mr Goh was absolved of his liability to compensate IPP.

There are two broad takeaways from the decision.

The first takeaway is that every director, both executive and non-executive, is held to a minimum standard of care. This standard requires directors to take reasonable steps to put themselves in a position where they can guide and monitor the management of the company. Put simply, ignorance of a company’s business is no defence, even for non-executive directors that are not involved in everyday operations. Accordingly, although Mr Goh was a non-executive director, the fact that he was unaware that IPP was carrying on the business of cargo trading meant that he was in breach of his duties.

It may be surprising that a director could be entirely unaware of an important part of a company’s business. But the reality is that modern day companies have become commercial behemoths with complex and layered operations that makes it all too easy for directors (especially non-executive directors) to delegate oversight over critical business decisions and lose visibility of what their companies do. It is therefore important for directors, regardless of their formal titles, to ensure that there is a robust chain of reporting and command such that they have sufficient knowledge of the company’s operations to discharge their duties.

The second is that, while the law imposes high standards on directors, it does not demand unrealistic standards. As noted, the Appellate Division accepted that Mr Goh had breached his duties for having been unaware of IPP’s cargo trading business. However, it was not persuaded that, even if Mr Goh had discharged his duties and had been properly informed of IPP’s activities, the sham transactions could have been prevented. IPP was affected by what the Appellate Division considered a “deep-seated fraud” that had gone undetected even by IPP’s auditors. In the circumstances, it was far from clear that Mr Goh could have prevented the loss even if he had discharged his duty.

However, just because the law does not expect directors to be superhuman does mean that directors can afford to be complacent. Directors would still do well to take reasonable and diligent steps to ensure that they have a good grasp of the company’s operations and engage competent professionals (e.g., auditors) to help surface risks that they may otherwise miss. In a sense, Mr Goh avoided liability not because his breach was minor, but because the extent of the fraud perpetrated meant that the gravity of his breach cannot be said to have caused the loss. In other words, a less sophisticated or extensive fraud might have yielded a drastically different outcome – directors should take heed.

A timeline organised list of events preceding the current development of Inter-Pacific Petroleum has been recorded by Manifold Times below:

Related: Singapore: Ex-Director of Inter-Pacific Petroleum wins appeal against former company

Related: Singapore: Ex-Director of Inter-Pacific Petroleum appeals High Court decision
Related: Singapore: Former auditors of Inter-Pacific Petroleum undergo private oral examination at court
Related: Singapore: Civil trial between Inter-Pacific Petroleum and Dr Goh Jin Hian begins
Related: Former Singapore Director of Inter-Pacific Petroleum sued for USD 156 million
Related: Inter-Pacific Petroleum creditors authorised to fund lawsuit against former Director
Related: New Silkroutes under investigation over possible breach of Securities and Futures Act
Related: Judicial Managers considering to take former Singapore Director of Inter-Pacific Petroleum to court
Related: Singapore: Inter-Pacific Group receives winding up order from High Court
Related: Singapore: Inter-Pacific Group files for winding up application at High Court
Related: MPA revokes Inter-Pacific Petroleum Pte Ltd bunker supplier licence
Related: Co-heads of Trade and Commodities Finance for Asia-Pacific leave SocGen
Related: Inter-Pacific Group, Inter-Pacific Petroleum to hold creditors’ meet
Related: NewOcean detains Singapore-flagged bunker tanker “Pacific Energy 28”
Related: SocGen lawsuit against NewOcean Petroleum dropped, party to counterclaim
Related: MPA revokes Inter-Pacific Petroleum bunker craft operator licence
Related: Magnets on MFMs: Trial starts for former bunker clerk of “Consort Justice
Related: First suspect charged over MFM tampering in landmark case
Related: With nearly $180 million of debt, IPP proposes interim judicial management
Related: Inter-Pacific Group, Inter-Pacific Petroleum under judicial management
Related: Magnets on MFMs: “Consort Justice” crew pleads ‘not guilty’ to tampering charge
Related: IPP responds to temporary suspension of bunker craft operator licence
Related: MPA temporarily suspends IPP bunker craft operator licence
Related: Singapore: Bunker Cargo officer, crew face charges over alleged MFM tampering

 

Photo credit: Helmsman
Published: 13 June, 2025

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Alternative Fuels

China’s SDARI receives AiPs for alternative-fuelled ships including ammonia bunker vessel

CSSC’s SDARI obtained Approval in Principle (AiP) certificates from classification societies ABS, RINA and LR for four vessel designs including a 50,000 cubic metre ammonia bunkering vessel.

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China’s SDARI receives AiPs for alternative-fuelled ships including ammonia bunker vessel

China State Shipbuilding Corporation’s (CSSC) Shanghai Merchant Ship Design and Research Institute (SDARI) recently obtained Approval in Principle (AiP) certificates from several classification societies for four vessel designs. 

Among the four is a 50,000 cubic metre (m3) ammonia bunkering vessel, which received AiP certificate from American Bureau of Shipping (ABS). 

It integrates liquid ammonia transportation and bunkering functions and can meet the long-distance transportation needs of liquefied gas goods such as liquefied petroleum gas (LPG) and liquid ammonia. 

The ship is equipped with three IMO Type A independent liquid cargo tanks, and uses zero-carbon ammonia fuel to drive the main engine and generator, meeting the IMO greenhouse gas emission reduction strategy and actively responding to the latest greenhouse gas intensity (GFI) requirements of the 83rd meeting of the IMO Marine Environment Protection Committee (MEPC 83). 

The entire ship is equipped with two independent 1,000 m3 deck liquid ammonia storage tanks, taking into account the ammonia fuel endurance requirements under multi-cargo loading and unloading, significantly improving operational economy and flexibility. 

In response to the needs of bunkering operations, it is specially equipped with a retractable bow thruster, side thruster and adjustable propellers to meet ABS’ DPS-1 notation and adapt to the complex port environment of bunkering operations. 

China’s SDARI receives AiPs for alternative-fuelled ships including ammonia bunker vessel

Meanwhile, a dual-fuel LNG/hydrogen-powered Ultramax bulker design and a 30,000 GT Roll-On/Roll-Off Passenger (ROPAX) ship designed to sail in the Mediterranean Sea received AiP certificates from RINA. 

SDARI also received AiP from Lloyd’s Register (LR) for a 113,000 dwt ammonia dual-fuel liquid cargo ship. The optimised propulsion system, specially configured with an ammonia dual-fuel power system and a wind-assisted propulsion system, is expected to save more than 10% energy, especially at low speeds. 

 

Photo credit: Shanghai Merchant Ship Design and Research Institute
Published: 12 June, 2025

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Alternative Fuels

GCMD-BCG survey: 77% of shipowners, operators view net zero as high strategic priority

Survey also found the use of bio-blended bunker fuels has more than doubled to 46% and methanol use has increased from 3% to 6% but uptake of more nascent technologies such as ammonia remains limited.

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GCMD-BCG survey: 77% of shipowners, operators view net zero as high strategic priority

The Global Centre for Maritime Decarbonisation (GCMD) on Wednesday (11 June) said a survey found 77% of shipowners and operators now consider achieving net zero a high priority in their strategy, up from 73% two years ago.

This was among the findings of the second edition of the Global Maritime Decarbonisation Survey, jointly conducted by GCMD and Boston Consulting Group (BCG) between October 2024 and February 2025.

The survey gathered 114 responses from shipowners and operators across a range of vessel types, fleet sizes, and regions. While the survey was conducted before the International Maritime Organization’s (IMO) MEPC 83 session in April, its findings already reflected sustained commitment across the industry. The outcomes of MEPC 83—introducing new regulatory targets and incentives—are expected to reinforce these ambitions and further accelerate momentum.

Survey results show that 60% of respondents have now set net-zero targets (up from 54%), while the use of bio-blended fuels has more than doubled to 46%, and methanol use has increased from 3% to 6%. However, uptake of more nascent technologies—such as ammonia, wind-assisted propulsion systems, solar panels, super-light ships, and air lubrication—remains limited.

The survey also reflects the industry’s desire for policies and regulations to create a level playing field. Nearly three-quarters of respondents identified either compliance measures or financial incentives as the most important policy objectives. A level playing field will ensure that early adopters are not competitively disadvantaged on cost and stakeholders with limited resources can benefit from financial support to overcome economic barriers.

The survey also gathered insights from key bunkering ports, whose support is critical for maritime decarbonisation. Most surveyed ports have roadmaps and dedicated teams focused on initiatives to facilitate maritime decarbonisation, and all of them, namely Port of Antwerp-Bruges, Port of Long Beach, Port of New York and New Jersey, Port of Rotterdam, and Port of Singapore, offer green incentives. 

A significant concern for ports, however, is the lack of demand certainty from shipping companies for both low-carbon fuels and Onboard Carbon Capture Systems (OCCS). This ‘chicken-and-egg’ dilemma hinders ports to take on the investment decision to develop the requisite infrastructure, though the recently introduced GHG pricing mechanism is expected to strengthen demand signals for low-carbon fuels.

Dr Sanjay C Kuttan, Chief Strategy Officer of GCMD, said, “Positive developments in maritime policy, especially from the IMO, which further tighten limits on GHG emissions, along with the increased ambitions voiced by survey respondents, are encouraging signals. Greater cooperation with the ports and pertinent stakeholders across the various value chains will be required to address challenges across the broader ecosystem. With the right investments and collaborative actions, the maritime industry can chart a course to a future where sustainable decarbonisation and commercial success can co-exist.

Anand Veeraraghavan, Managing Director and Senior Partner of BCG, said, “It is encouraging to see that even in the face of global uncertainties, the maritime industry’s decarbonisation ambitions remain intact and steadfast. The recent MEPC outcomes mark a pivotal step forward, sharpening demand signals with incentives for exceeding compliance goals and penalty mechanisms for shortfalls. Now is the time for the industry—both ships and ports—to build on this momentum.

Note: The second edition of the GCMD–BCG Global Maritime Decarbonisation Survey report can be viewed here

 

Photo credit: Lukas Blazek on Unsplash
Published: 12 June, 2025

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